Interest rates

10 essential mortgage questions

Mortgage matters

Stuck on the property ladder A shortage of choice limits those trading up

What are the key questions you need to ask?

What you need to know to attract tenants

Investing in property

What next for borrowers looking to either remortgage or buy a home?

Understanding your options

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www.p3wealth.co.ukP3 Wealth Management Ltd is authorised and regulated by the Financial Services Authority.

Issue 19

Planning your remortgage.Isn’t it time you talked to us about saving money?We’re passionate about making sure you’ll obtain the best mortgage deal available.

Contact us to discuss your current situation, and we’ll help you find the best deal that's right for you.

Getting a foot on the property ladderThe financial reality of

buying a first home

New home registrations increaseDecember weather didn’t

dampen housebuilders’ spirits

Lending constraintsThe underlying drivers to be

considered before looking

towards solutions

Guidance to house builders and Local AuthoritiesHow the new planning system

is intended to work

Mortgage matters Understanding your options

Undermining the marketProposals to change

mortgage regulations

Interest ratesWhat next for borrowers

looking to either remortgage

or buy a home?

Property factsHome building

Rental propertiesTime taken to secure a

tenant has fallen

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Stuck on the property ladder A shortage of choice

limits those trading up

Investing in propertyWhat you need to know to

attract tenants

Buy-to-let mortgage lendingExpectation of strong rental

demand to remain

Fixed-rate dealsA dramatic effect on

homeowners’ rate expectations

Energy efficiency improvementsProviding landlords with up-

front financing to make rental

properties more efficient

NHBC certificateCovering you against specified risks

House building permissions downDrop coincides with the coalition

government having set out a

radical agenda for planning change

Confidence in propertyStrong returns for investors over

the longer term

Reconstructing our regionsThe clear economic benefits of

meeting housing needs

Buy-to-letStart of the New Year attracts a

growing number of investors

Underpinning the UK property marketStrong demand for good-quality

family houses

Residential property buyers gamblingAre you taking a major financial risk

by not having a survey?

Pre-empting a future interest rate riseAn increasing number of homeowners

are rushing to remortgage

Mortgage lendingHome loans on offer have more than

doubled

Developer makes good progressEven with economic uncertainties,

tax rises and government cutbacks

10 essential mortgage questions What are the key questions you need

to ask?

Landlords look to increase pricesThe lack of finance means more potential

buyers are opting to rent instead

Understanding the jargon The A to Z of property and

mortgage terms

In this issueIN THIS ISSUE

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03

Welcome

WELCOME

Welcome to the latest edition of our property news

and mortgage magazine. We are ‘passionate about

property’ and can advise you on any areas that may

interest you.

In a hugely competitive market, lenders are

continually updating and extending their range of

mortgages. Two of the most important points to

consider when choosing a mortgage are how you

pay back the capital that you borrow and how you

pay the interest on it. On page 09, we consider the

importance of how to fund what will probably be

the largest purchase you’ll ever have to make.

On page 12, read how optimistic sellers have

pushed up property asking prices but those

wanting to move home are stuck thanks to

a shortage of homes on offer. According to

Rightmove’s January report, asking prices rose by

0.3 per cent in the four weeks to mid-January – the

first rise in three months.

The National House-Building Council (NHBC)

provides the Buildmark warranty and insurance

cover for newly built and newly converted homes

and other warranties for social housing and

self-build homes. On page 16, we look at why

it is important that you check your warranty

documentation, which you should have received

from your solicitor on completion.

A full contents listing appears on page 3.

At the time of publishing this edition, the

property and mortgage market and economic

events are changing very rapidly and some

further changes are likely to have occurred by the

time you read it.

Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. The Financial Services Authority (FSA) does not regulate most Buy-to-let or Commercial Mortgages.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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Assessing your mortgage options.Are you looking for the best mortgage solution?If you’re unsure about how to navigate the mortgage market during these challenging economic times, let us help you – don’t leave it to chance.

Contact us to discuss your requirements, and we’ll help you make a well informed decision.

NEWS

Getting a foot on the property ladderThe financial reality of buying a first home

And with the average first-time buyer

deposit now at £37,000, the financial reality

of buying a first home is concerning many

of those expecting to get a foot on the

property ladder.

This means that without taking into

account living or renting costs, first-time

buyers aged between 22 and 29 have to save

45 per cent of their take-home pay every

month for five years to afford a deposit.

House-building is currently at its lowest

since 1923, with mortgage lending set to be

at its lowest level for 30 years.

Stewart Baseley, Executive Chairman of the

Home Builders Federation (HBF), said:

‘More than 2.7 million young adults are

still living at home. The government needs

to help first-time buyers, and ensure that

policies enable us to build the homes the

country needs and mortgage providers are

actively increasing their lending to first-

time buyers.’ n

Over 1 million women and 1.7 million men aged between 20 and 34 are still living at home. The average age of a first-time buyer purchasing a home without financial assistance is now 37, meaning that more and more young people are leaving it later to get married and start families.

06

This means that without taking into

account living or renting costs, first-time buyers aged between 22 and 29 have to save 45 per cent of their take-home pay every month for five years to afford a deposit.

NEWS

New home registrations increaseDecember weather didn’t dampen housebuilders’ spirits

Figures from the NHBC for new home

registrations in December 2010 show an

increase on 2009 figures, with just over

7,385 registrations during the month

(compared to 7,149 in 2009). These, added

to the previous 11 months, mean year end

numbers look set to end approximately

30 per cent higher than overall

registrations reported in 2009 (115,458 in

2010 compared with 88,083 in 2009).

Month on month, December 2010

figures were down on November 2010 –

a traditional trend for the industry,

reflecting a shorter month over the

festive season.

Imtiaz Farookhi, Chief Executive

of NHBC, said: ‘No one is popping

champagne corks but there is a growing

belief that the worst is now behind us and

we’re on the road to recovery.

‘The pace and extent of that recovery

really depends on factors out of the

hands of the industry, such as mortgage

availability and monetary pressures

on consumers. These are the biggest

obstacles that the house building sector

now faces for the coming year.’

NHBC statistics for the rolling quarter

October - December 2010 show that:

Private sector registrations were up

1 per cent (to 18,551) when compared

with the same period last year (18,393)

Public sector registrations were 8,711 –

13 per cent higher than the same period a

year ago (7,685)

Registrations in the combined private

and public sectors were 5 per cent up

on the same period in 2009 (27,262, up

from 26,078) n

The severe December weather didn’t dampen housebuilders’ spirits, as the last quarter of the year saw an increase in new home registrations, according to the National House-Building Council (NHBC).

07

Lending constraintsThe underlying drivers to be considered before looking towards solutions

The Council of Mortgage Lenders (CML) has responded to a discussion initiated by Housing Minister,

Grant Shapps, over the large deposits needed by first-time buyers, by pointing out that lending

constraints currently apply to all those who don’t hold a large amount of equity in their homes.

The CML explains that high loan-to-

value (LTV) lending is very capital-

intensive for lenders who typically need

to hold six to eight times more capital

against a 90 per cent LTV loan than a

60 per cent LTV loan.

In addition, demand for high LTV

products is relatively low, partly because

of the cost to borrowers but also

because consumers are unsure of the

future direction of house prices.

The lenders’ body therefore urges

the government to ‘consider and

understand’ these underlying drivers

before looking towards solutions.

For example, while mortgage

insurance, shared ownership and

product innovation can all play their

part, none will provide a ‘magic bullet’

to normalise the mortgage market, the

Council suggests.

CML Director General, Michael

Coogan, sums up: ‘There is no simple

quick fix for a market that has changed

fundamentally since the credit crunch.’

He adds: ‘Creative approaches

have a role to play in helping to turn

market stability into market recovery,

and lenders look forward to working

constructively both with government

and the house building industry as we

look to help create the kind of conditions

conducive to responsible innovation.’

The CML estimates gross lending for

2011 at around £135bn, compared to

£360bn at its pre-crunch peak. n

Guidance to house builders and Local AuthoritiesHow the new planning system is intended to work

But, as a recent YouGov poll

demonstrates, the government’s

aspiration that the new system will

deliver more homes relies on changing

local people’s attitudes to housing.

A YouGov survey commissioned by the

New Homes Marketing Board (NHMB)

has revealed that more than eight in

ten people (81 per cent) believe Britain

needs more housing for sale and rent,

especially affordable homes for first-time

buyers. But it also shows that far fewer

people, just 50 per cent, would welcome

more homes of all types in their own

immediate neighbourhoods.

This is a decrease even from 2007,

when in a similar poll 58 per cent of

people said they would welcome more

homes in their neighbourhoods.

The government believes that by giving

people more power, more homes will get

built but this survey shows how much

government and local authorities need to

do to help house builders convince local

people of the benefits of development.

With Local Authority budgets cut, the

financial rewards of development, through

the New Homes Bonus, will be vital for

boroughs and towns across the country.

Stewart Baseley, Executive Chairman of

the Home Builders Federation (HBF), said;

‘The localism proposals provide a

real chance for people to develop their

communities for the better and house

builders will work with them to build the

homes communities and families want.

More homes will mean more money

for local facilities and services and

will enable young people to live in the

communities where they grew up.

‘The government and local councils

need to join us in educating communities

of the severity of the housing crisis and

the benefits of new homes.’ n

The publication of the Localism Bill after much delay provides guidance to house builders and Local Authorities alike as to how the new planning system is intended to work.

08

LEGAL MATTERS

A YouGov survey commissioned

by the New Homes Marketing Board (NHMB) has revealed that more than eight in ten people (81 per cent) believe Britain needs more housing for sale and rent, especially affordable homes for first-time buyers.

Mortgage mattersUnderstanding your options

When you choose a mortgage, you’ll

need to think about the repayment

method, interest rate deals and special

features of some mortgages. The

best one for you will depend on your

circumstances, so it’s important to

understand your options and obtain

professional advice.

REPAYMENT METHODSThere are the two main ways you can

pay off your mortgage. These are called

‘repayment’ or ‘interest only’.

REPAYMENT MORTGAGEWith a repayment mortgage you make

monthly repayments for an agreed period

(the term) until you’ve paid back the loan

and the interest.

INTEREST ONLY MORTGAGEWith an interest only mortgage you make

monthly repayments for an agreed period

but this will only cover the interest on

your loan. You’ll normally also have to pay

into another savings or investment plan

that will hopefully pay off the loan at the

end of the term.

WHICH TYPE OF INTEREST RATE IS SUITABLE FOR YOU?As well as deciding on your repayment

method, you’ll need to look at the interest

rate deals on offer. Suitability of different

deals will depend on your personal

circumstances and any tie-ins or penalties

that may be attached.

STANDARD VARIABLE RATEWith a variable rate mortgage your payments

go up or down with the lender’s standard

interest rate. This often changes following

Bank of England base rate changes.

STANDARD VARIABLE RATE WITH CASHBACKWith this type of deal you get a cash

lump sum as well as the loan when you

take out the mortgage. You’re usually tied

into the variable rate for a set period.

DISCOUNTED RATEYou pay a lower interest rate to begin with,

then move to another rate (usually the lender’s

standard variable rate) after a set period.

TRACKERTracker rates are linked to the Bank of

England rate or some other ‘base rate’.

This means they’ll always go up or down

in line with changes to the base rate.

FIXED RATEYou pay a fixed rate of interest for a set

period, so you know exactly what you’ll

be paying each month during that time.

When the fixed period ends, you’ll usually

move to the lender’s standard variable

rate. There are usually penalties if you pull

out early.

CAPPED OR CAP AND COLLARWith a capped rate you pay a variable

interest rate, but there’s a ceiling so

your payments won’t go above a certain

amount for a set period. Some deals

include a collar too – this is the lowest

rate you’ll get. If interest rates fall below

the collar, you’ll lose out.

FLEXIBLE, CURRENT ACCOUNT AND OFFSET MORTGAGESFlexible, current account and offset

mortgages offer you the facility to control

and vary your monthly payments. They

can be used with repayment or interest

only mortgages.

For example, you can:

n pay less one month and more the next

n make lump sum repayments (and

sometimes draw these back)

n take a ‘payment holiday’ pay off your

mortgage early

KEY FACTS DOCUMENTS Mortgage providers are now legally

bound to present customers with a Key

Facts document.

The Financial Services Authority (FSA),

which regulates mortgages, says the Key

Facts document should deliver clear,

simple and user-friendly information to

consumers about the mortgage offer.

The Key Facts document sets out the

total cost of the loan – not just the headline

interest rate – including any up-front fees.

Each new mortgage customer has to

confirm that they have received the Key

Facts before putting pen to paper. n

In a hugely competitive market, lenders are continually updating and extending their range of mortgages. The most important points are how you pay back the capital you borrow and how you pay the interest on it.

MORTGAGES

09

UNDERMINING THE MARKETProposals to change mortgage regulations

Organisations from across the housing industry have

warned of the consequences relating to the Financial Service

Authority’s (FSA) proposals to change mortgages regulation.

Independent research shows that if the FSA’s

proposals had already been implemented, of the 11

million current mortgage holders:

n Nearly half wouldn’t have been able to borrow

what they did

n Up to a quarter may not have been able to

borrow anything at all

Moving forward, it is estimated that each year the

proposals would mean:

n Up to 153,000 house purchases could

not be possible

n 57,000 first-time buyers would be refused

mortgages

The implications for the housing market of such a

reduction in mortgage availability – already one of

the main constraints on housing delivery – are clear,

and additional pressure could be placed on the already

overstretched private and social rental sectors, where 5

million people are waiting on Local Authority waiting lists.

The organisations also warned that unless the FSA

changed its view that lending on shared ownership

properties is sub-prime, the banks would continue

to turn away more than £240m of valid business. In

2009/10, this resulted in 4,600 low-cost homes being

left vacant, even though 110,000 households had

applied to move into them.

Elizabeth Richards, Head of Legal & Policy at the

National Federation of Property Professionals (NFOPP),

comprising both the National Association of Estate

Agents (NAEA) and the Association of Residential

Letting Agents (ARLA), commented:

‘These proposals may seriously undermine the

mortgage market. The National Association of Estate

Agents attributes the decline in both buyers and sellers

during the past few months to restrictive lending

criteria. These new regulations have the potential to

exacerbate this problem. Loans to first-time buyers are

considerably lower than at this time last year, and the

NAEA believes that these new proposals will prevent

even more people from buying a home.’

What next for borrowers looking to either remortgage or buy a home?

Interest rates

While the Bank of England has not given

any indication that it will raise the base

rate, commentators are suggesting it may

have to raise rates sooner rather than

later and accelerate the pace of rates

returning to a more normal level.

That view appears to be shared by

the money markets and this has pushed

up swap rates, the funding that heavily

influences fixed rate mortgages.

But while higher swap rates could

feed through to higher mortgage rates,

it is far from certain. Banks still have

hefty margins that mean they can keep

mortgage rates low even if swap rates or

the base rate rise.

The problem is that rates are being

used not just to make money but

also to ration mortgages. The CEBR /

Chesterton Humberts property forecast

for 2011 suggested that a new bout of

quantitative easing will help. It said:

‘The expansion in the money supply will

increase competition between lenders

forcing down spreads and fees, making

mortgages cheaper.’

But waiting around to see if rates fall

further is a gamble and jittery borrowers

are increasingly tempted to choose a

fixed rate.

If you are in the position of needing to

fix, remember that if you have a 25 per

cent deposit or equity, despite the doom

and gloom, now is not a bad time to be

looking for a mortgage.

To get the full choice of deals, raising

a decent deposit is still vital. The

benchmark figure is 25 per cent – if you

have this, then you’ll be getting close to

the best rates, although for an absolute

cheapest deal you’re still likely to need

40 per cent.

A selection of better deals for 15 per

cent deposits are available and even the

10 per cent deposit market is looking

more buoyant. n

Inflation is the problem that just will not go away quietly for the Bank of England and that has led to the outlook for interest rates picking up.

NEWS INTEREST RATES

10

RENTAL PROPERTIESTime taken to secure a tenant has fallen

UK private rental properties are being let

within 15 days on average, according to

property services group, Countrywide.

The firm’s latest quarterly survey shows that

the length of time taken to secure a tenant

has fallen by five days in a year, as an average

4.4 tenants line up for each available home.

The number of new tenants registering for

rental accommodation increased by 14 per

cent compared with a year earlier, and the

increase took the total number of new tenants

for the year to over 200,000, a record high.

Countrywide are seeing a change in the

demographic of tenants, with a growing

number of professional tenants emerging

across the country as affordability issues face

homebuyers who are unable to sell or raise

the capital to buy their next home.

These wider economic issues are reflected

in our rental stock, with a growing number

of three- and four-bedroom family homes

entering the market. The research suggests

that the proportion of these homes entering

the rental market grew by 3 per cent last year.

However, the greatest demand is for two-

bedroom apartments and houses, which are

still in short supply.

Demand is at its greatest in the South West,

although letting agents throughout the UK

reported a lack of supply, while confirming

that two-bedroom houses and apartments

remain the most sought-after property types.

MARKET DATA

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NEWS

Property factsHome building1 BRITAIN IS EXPERIENCING A HOUSING CRISISCurrent home building levels are nowhere

near enough to meet demand. Last year

160,000 new homes were built in England,

compared with projected household

growth of 223,000 per year.

Average house prices in England are more

than seven times average salaries and are set

to reach nine-and-a-half times this by 2026.

2 THE GOVERNMENT HAS RAISED HOME BUILDING TARGETSThe government has set a housing target of

240,000 homes per year by 2016, and a total

of 3 million homes by 2020.

3 BRITAIN’S PLANNING SYSTEM IS STILL NOT BRINGING LAND FORWARD QUICKLY ENOUGH TO MEET HOUSING NEEDSIt takes on average 15 months for home

builders to receive full planning

permission on sites they wish to develop.

This excludes time taken for pre-application

discussions, which can extend the whole

process to over two years in many cases.

4 BRITAIN’S HOME BUILDERS ARE WORKING HARD TO MEET HOUSING NEEDS New home completions have risen some 35

per cent since 2001.

5 HOME BUILDING DOES NOT POSE A THREAT TO THE COUNTRYSIDEGreen Belt land comprises 13 per cent of

total land in England. Only 8 per cent of land

in the UK is classed as urban, half the figure

in Holland and lower than Belgium, Denmark

and Germany.

6 NEW HOMES ARE FAR MORE ENVIRONMENTALLY FRIENDLY AND SUSTAINABLEDue to building standards introduced in

2006, new homes are now 40 per cent more

energy efficient than new homes built at the

beginning of the decade.

Source: CLG Housing Statistics, Housing Green

Paper, HBF research, CLG Housebuilding

Statistics, CLG Land Use Statistics, CLG Local

Planning Authority Green Belt Statistics,

National Housing Planning Advice Unit.

NEWS

Stuck on the property ladder A shortage of choice limits those trading up

Optimistic sellers have pushed up

property asking prices but those wanting

to move home are stuck thanks to a

shortage of homes on offer, according to

Rightmove’s January report.

Asking prices rose by 0.3 per cent

in the four weeks to mid-January, the

property listing website’s index recorded

– the first rise in three months.

At £223,121, the average property asking

price is up 0.4 per cent on a year ago.

Homeowners wanting to move up the

property ladder are being hardest hit by

the stuttering market, as a shortage of

choice limits those trading up.

Those hunting for the traditional semi are

being hampered the most, with the supply

of semi-detached homes – the property

that many families looking for more space

aspire to – down 30 per cent on last year.

The number of flats and terraced homes

being offered is down 10 per cent, and

the number of properties coming to the

market each week stands at 9,150, almost

half the 17,000 January average seen

before the credit crunch hit.

With house price inflation having risen

rapidly over the past decade, many

buyers of a family home face a stamp

duty bill of at least £7,500 for properties

costing more than £250,000.

This has now been added to by lenders

demanding minimum deposits of 25 per

cent to secure the best mortgage rates,

leaving a mover hoping to buy a £300,000

home needing to raise £84,000 – £9,000

in stamp duty and a £75,000 deposit or

equity.

Miles Shipside, Director of Rightmove,

said: ‘With the number of new sellers at

a two-year record low, prices are being

underpinned by muted new supply just

managing to fight off the downsides of

lender reticence.

‘However, in less popular locations, the

smokescreen of New Year price optimism

is temporarily masking the collateral

damage that the new era of tighter credit

will continue to inflict.’

One of the reasons behind the

shortage of semi-detached homes

being put up for sale could be that their

owners are facing the biggest frustration

in attempting to move up the property

ladder and find reasonably priced

detached properties.

Mr Shipside said: ‘These figures

show that owners of semis aspiring

to trade up are the most likely to

feel trapped and frustrated of those

stuck on the property ladder. They

would previously have sold to owner-

occupiers of terraces, who in turn

would have sold to first-time buyers or

buy-to-let investors.

‘With fewer buyers at the bottom of

the chain, and short chains due to more

vacant property, some are obviously

unwilling or unable to come to market.

‘Also semi owners face the biggest

price jump to trade up to their target

market of detached homes, and lenders

are no longer as profligate in their ways

to fund this traditional step onto the next

rung of the ladder.’

Rightmove measured 1.3 million

properties marketed in 2010, compared

with just 530,000 mortgages. n

12

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BUY-TO-LET MORTGAGE LENDINGExpectation of strong rental demand to remain

Buy-to-let mortgage lending grew by 7 per

cent in 2010, according to data from the

Council of Mortgage Lenders (CML). By the

year-end, there were an estimated 1 .3 million

buy-to-let loans outstanding, worth £152bn.

The total value of lending during 2010 stood

at £10.4bn (up 22 per cent on 2009), and the

total number of loans advanced increased 10

per cent, to 102,000.

In the final three months of the year,

there were 28,600 new buy-to-let loans

advanced, worth £3bn, a rise of 6 per cent

by volume and 7 per cent by value from the

third quarter.

In terms of loan performance, the buy-to-let

sector saw a further decline in the number of

mortgages in arrears, with low interest rates

a key driver in the improvement.

For 2011 , the CML expects strong rental

demand to remain as deposit constraints

continue to present obstacles to potential

first-time-buyers.

Director General, Michael Coogan, commented:

‘Funding remains a key constraint on growth in

buy-to-let lending, but demand seems to be

resilient and loan performance has improved.’

He added: ‘Loan performance could

potentially be adversely affected by rising

rent arrears or interest rate rises, but at

present there is no indication of these

pressures materialising in practice.’

PROPERTY INVESTMENT

Investing in propertyWhat you need to know to attract tenants1. Research, research, research – know

the area you are buying into. Regeneration

plans and new Tube stations are great

indicators of up and coming areas and

capital appreciation. Apply the ten-minute

rule for access to transport links, bars and

restaurants and local amenities.

2. Location - consider who your ideal tenants

will be. To attract quality tenants you need

quality locations.

3. Buy well - consider both price and

content. Research prices in the area and look

for comparables. Can white goods, flooring

or furnishing be included in the purchase?

4. Make sure the numbers work - most wealth

is created through capital appreciation, so buy

a property that supports this type of growth.

Ensure you include all costs in your financial

projections (such as legal fees, stamp duty,

service charges, ground rent and contingency

to accommodate void periods between

tenants). These costs are all too often ignored,

leading to negative monthly cash flows.

5. Appoint the right advisers - a professional

regulated adviser can secure the best

deals free from fees and aligned to your

investment strategy. Good letting agents will

minimise void periods. Remember that not all

solicitors are off-plan specialists.

6. Don’t expect to get rich quick - property

investment should be approached with a

long-term view. It is an asset class that in the

medium to long term has outperformed all

other asset classes and we would encourage

people to build a sustainable, appropriately

geared portfolio over a number of years.

7. Never ignore the basics of supply and

demand - find out what is needed in your

chosen area. The markets for one-bedroom

flats and four-bedroom houses do not follow

the same pattern.

8. Don’t be influenced by your emotions –

you’re not living in your investment so decorate

and furnish at an appropriate level of quality.

Make sure you understand what quality is

required and don’t be tempted to furnish

cheaply if you want to retain quality tenants.

9. Be wary of incentives - particularly

schemes or developments where you are

under pressure to sign up quickly to secure

the deal, and never buy an off-plan or new

property without the guarantee of either a

National House-Building Council (NHBC) or

Zurich ten-year warranty.

10. Don’t pay over the odds - avoid paying

finder’s fees, commissions or subscriptions,

particularly prior to completion. If the

investment proposition is a sound one, there

should be no reason to pay up-front fees.

NEWS

14

FIXED-RATE DEALSA dramatic effect on homeowners’ rate expectationsResearch from Unbiased.co.uk suggests

that the average mortgage borrower is only

prepared to enter a fixed-rate deal if the

interest rate is around 3.3 per cent.

With the Bank of England’s base rate still at

0.5 per cent, the professional advice portal

suggests the emergence of a ‘rate-spoilt’

generation, as back in January 2009 a rate of

4 per cent would have appeared attractive,

given that fixed-rate deals peaked at around

7.8 per cent at the end of 2007.

Furthermore, the study indicates that only a

quarter of respondents coming to the end of

their deals would move on to a new fix rather

than reverting to their lenders’ standard

variable rates.

According to Unbiased.co.uk, homeowners

are likely to continue to refrain from

remortgaging to a fixed-rate deal until the

base rate starts to rise.

The firm’s Chief Executive, Karen Barrett,

comments: ‘With the base rate now remaining

at a record low, our tracked research shows

this has had a dramatic effect on homeowners’

rate expectations.’

She adds: ‘Their ideas of what is a reasonable

fixed-rate mortgage have become distorted

in the low interest rate environment and

they need to ensure that their mortgage

expectations are realistic.’

According to Ms Barrett, homeowners need

to be alert to ensure they don’t miss out on

getting the best deals before it’s too late.

Landlords should be considering measures

to improve the energy efficiency of their

properties now, the Association of Residential

Letting Agents (ARLA) recommends.

The government’s Green Deal (which should

be up and running in Autumn 2012) will

provide up-front financing to make rental

properties more energy efficient where

tenants request improvements.

However, by 2015, landlords who don’t comply

may be forced to make improvements because

ministers are determined that all properties

with an Energy Performance Certificate rating

of F or G are upgraded.

For private landlords with older

properties, this may present a

significant challenge, so ARLA is

suggesting that simple measures, such

as loft insulation (the recommended

thickness is between 250-300mm),

the insulation of water fittings, and the

draught-proofing of doors and windows,

are tackled immediately.

ARLA Operations Manager, Ian Potter,

reminds landlords that they can already

take advantage of a tax allowance

of up to £1,500 for energy efficiency

improvements, through the Landlord’s

Energy Saving Allowance. n

NEWS ENERGY EFFICIENCY

Energy efficiency improvementsProviding landlords with up-front financing to make rental properties more efficient

Buy-to-let.We offer professional investor advice, essential when choosing the right mortgage deal.Providing investors with professional advice to make an informed choice is what we do best.

Whether you’re a new or experienced investor, contact us to discuss your buy-to-let requirements.

NHBC certificate

The Buildmark warranty and insurance

cover is divided into five main parts:

COVER BEFORE COMPLETION Cover during the first two years (from

the date shown on the Ten Year Notice/

Insurance Certificate)

COVER DURING YEARS THREE TO TEN Additional cover in years three to ten

(where NHBC’s subsidiary carried out the

building control)

The steps you should take vary

depending on how long the cover has

been in operation. It is important to check

for the number of your insurance policy

and the commencement date of the

cover. This information is shown on your

Insurance Certificate.

COVER BEFORE COMPLETION If, due to insolvency or fraud, the builder

does not start building or converting

your home, or fails to finish it, NHBC

will reimburse money you have paid the

builder for the home where the money

cannot be recovered from them. If the

property is not finished, NHBC can

arrange for the property to be finished in

accordance with their Standards.

The maximum amount NHBC will pay is

10 per cent of the original purchase price

or £100,000 (whichever is less). 

COVER DURING THE FIRST TWO YEARS If you discover any defects or damage in

the first two years from the date of your

Insurance Certificate, you must report

these to the builder. The builder must

put right any defect or damage to your

home, caused by not building to NHBC

standards, within a reasonable time

scale. If the builder is notified of defects

or damage within this period of cover,

they remain responsible for putting the

problem right, even after this period of

cover has expired.

If, after notifying the builder of the

problem, you’ve received no response,

you should contact NHBC and they will

write to them on your behalf.

Remember that the builder is not

responsible for items such as normal

shrinkage or normal condensation due to

the property ‘drying out’, general wear

and tear or damage arising from failure to

maintain the property.

NHBC RESOLUTION SERVICEIf the builder fails to put right the

problems, NHBC will usually offer

a Resolution Service, which aims to

resolve disputes between you and the

builder. Under the Resolution Service,

they can also help arrange the work

needed to put things right if the builder

fails to do so. If the builder is insolvent,

then they insure his obligations.

NHBC can only help with disputes about

defects or damage to your home. They will

not be able to help you if you have a dispute

about financial or contractual matters.

COVER DURING YEARS THREE TO TEN During years three to ten, NHBC provides

direct insurance cover and you should

contact them, rather than the builder,

if you need to make a claim. Generally,

the insurance cover NHBC provides will

depend on the type of policy you have. It

is therefore important that you read your

own documents for specific information. 

Additional cover in years three to ten

where NHBC’s subsidiary carried out the

building control

This cover only applies if NHBC Building

Control Services Ltd has carried out the

building control for your home. If it has,

you have additional cover in years three

to ten against costs arising from the

builder’s failure to comply with specified

statutory Building Regulations, where

there is a present or imminent danger to

the health and safety of the occupants of

the home.

Your Insurance Certificate will show if

this cover applies to your home.

My property is less than two years old.

What should I do if I discover a defect

or damage?

In the first two years after completion

of the property, it is usually the builder’s

liability to rectify defects or damage

caused by failure to build to NHBC’s

technical Standards.

In the first instance, you should notify

your builder of any defects or damage.

There is no need to notify NHBC.

However, you should keep a copy of all

correspondence and any other relevant

information, such as notes of telephone

conversations, and contact them in the

event of a dispute.

If a dispute arises regarding work to be

done, NHBC usually provides a Resolution

Service (see above). This assists in

resolving straightforward disputes

between homeowners and builders. 

WHAT IS THE BUILDER LIABLE FOR?The builder should put right, within a

reasonable time and at their own expense,

any defect or damage caused by a failure

to build to their technical Standards

which is notified to them within this

period of the cover. 

If you have to move out of the home

so that work can be done, the builder

The National House-Building Council (NHBC) provides the Buildmark warranty and insurance cover for newly built and newly converted homes, and other warranties for social housing and self-build homes. If you buy a newly built or converted home, it is therefore important that you check your warranty documentation, which you should have received from your solicitor on completion.

BUILDMARK

16

Covering you against specified risks

should meet any reasonable costs you

incur, by prior agreement with the builder,

for removal, storage and appropriate

alternative accommodation.

If the builder has been notified of a

defect or damage during this period of

cover, then they remain liable to put it

right even after this period has expired.

WHAT IS THE BUILDER NOT LIABLE FOR?n Wear and tear or deterioration

caused by neglect or failure to carry

out maintenance.

n Dampness, condensation or shrinkage

not caused by a defect.

n Anything excluded by an endorsement

on the Insurance Certificate.

n Anything caused by alterations or

extensions to your home.

n Anything resulting from compliance

with written instructions given by or

on behalf of the first owner in respect

of design, materials or workmanship.

n Any cost or expense greater than that

necessary to carry out a workmanlike

repair of the defect or damage.

n Any items falling outside the

definition of home (as defined in

your policy document).

n If you are not the first owner, anything

which you knew about when you

acquired the home and which resulted

in a reduction in the purchase price

you paid or which was taken into

account in any other arrangement.

MY PROPERTY IS MORE THAN TWO YEARS OLD. WHAT DOES MY POLICY COVER?During years three to ten after

completion, NHBC handles insurance

claims under the NHBC Buildmark (their

warranty and insurance).

In general, this part of the cover insures

against damage that has resulted from

construction defects in the structural and

weatherproofing parts of the home. The

cost of the work must exceed a minimum

sum for the claim to be valid. Not all

types of damage or parts of the property

are covered in years three to ten. n

BUILDMARK

17

NEWS

18

House building permissions downDrop coincides with the coalition government having set out a radical agenda for planning change

Local Authority planning permissions for

house building continued to head firmly

downwards in the fourth quarter of 2010,

the latest Home Builders Federation

(HBF) Housing Pipeline report released

reveals. It is the third successive

quarterly fall and leaves permissions at

less than half the rate being granted four

years ago.  

Across Great Britain, just 33,000 homes

were approved for construction in the

last three months of 2010 – 9 per cent

down on the previous quarter and

22 per cent down on a year ago. Social

housing was hardest hit with only 5,500

approvals – a new low for the survey and

particularly concerning with five million

people already languishing on Local

Authority housing waiting lists.

HBF released the report just days after the

government published its 2010 housing

statistics that showed the number of new

homes completed in England in 2010

slumped 13 per cent on the previous year,

itself the lowest peacetime number on

record since 1923.

The implications of the collapse in

permissions are stark and exacerbate an

already acute housing crisis. Currently

the country has a housing shortfall

estimated to be a million homes, with

people being forced to stay with their

parents for longer and first-time buyer

levels at an all-time low.

Permissions granted for homes typically

take up to three years to build. So the full

implications of this drop will not be felt

for some time. However, with household

formation projections showing the need

for England to build around 232,000

homes a year until 2033, and 2010’s total

at just 103,000, there is obvious potential

for the crisis to deepen.

The new Housing Pipeline report

shows that through 2010 there was a

steady fall in permissions granted to

developers for new homes in England,

with a drop from over 40,000 in the

first quarter to under 30,000 in fourth

quarter. This drop coincides with the

coalition government having set out

a radical agenda for planning change.

The downward trend in permissions

shows the importance of the

government implementing its proposals

for a pro-growth planning system as

soon as possible.

Commenting, HBF Executive Chairman,

Stewart Baseley, said:

‘These figures are extremely

concerning. A reduction in permissions

granted now will see fewer homes

built in future years, exacerbating the

already acute housing shortage we are

currently experiencing.

‘The figures demonstrate the necessity

for the government to clarify exactly

how the new Localism-based planning

system will deliver the homes and

supply the growth we desperately need.

Only by ending the ongoing hiatus

caused by the scrapping of the old

system without a ready replacement can

developers and Local Authorities plan

ahead confidently and effectively for

new housing.

‘It is also crucial that councils

recognise the housing shortage and

accept their new responsibility for

housing supply. This will require

understanding the new system, taking

full account of the government’s

incentives and allowing developers to

build the homes local residents and

the country desperately need.’

The report, compiled by Glenigan for

HBF, is the second of what will be

quarterly monitoring. It will provide a

regular and accurate assessment of the

situation being faced by developers as

Local Authorities get used to the new

planning system. n

Local Authority planning permissions for house

building continued to head firmly downwards in the fourth quarter of 2010, the latest Home Builders Federation (HBF) Housing Pipeline report released reveals. It is the third successive quarterly fall and leaves permissions at less than half the rate being granted four years ago.  

NEWS

19

20

New research has shown that investors

see the property market as the best

place in which to inject their hard-

earned cash this year. According to

the Worldwide Property Group’s latest

confidence tracker survey, 72 per cent of

capitalists believe that property makes a

superior investment.

This places bricks and mortar ahead of both

gold – ranked top by less than one-fifth of

respondents – and shares, which came third in

the list with just 11 per cent of the vote.

Interestingly, the group also found that 77 per

cent of investors consider this to be a great

time to buy property in the UK, while 64 per

cent view overseas markets as a strong option.

Kevin Wilkes, Managing Director, commented: ‘It’s

no surprise that so many people feel that property

offers them the best investment potential.

‘It has consistently produced strong returns

for investors over the longer term, and during

a downturn there is even more potential to

achieve great returns.’

He went on to say that the US is currently

a ‘very appealing’ location, with some

‘incredible bargains’ available to those able

to make a cash purchase.

‘My tip for 2011 would be to make this the

year that you invest. Don’t leave it too

late and miss out on some of the best

opportunities we have seen in decades.’ n

NEWS

Confidence in propertyStrong returns for investors over the longer term

New research has shown that

investors see the property market as the best place in which to inject their hard-earned cash this year.

BUY-TO-LETStart of the New Year attracts a growing number of investors

Rents in England and Wales fell slightly in January, as the buy-to-let market saw a growing number of investors.

According to the latest Buy-to-let Index from LSL Property Services, average rent dropped by 0.3 per cent (£682) compared with December but remained 4 per cent higher than a year ago, with signs of renewed growth in several areas.

The January movement marked the second consecutive monthly fall and took average yield down to 4.9 per cent, as rents declined at a faster pace than rental property values.

LSL Commercial Director, David Brown, points out that the number of buy-to-let loans available increased by 7 per cent in the final quarter of 2010, according to figures from the Council of Mortgage Lenders (CML).

He commented: ‘There are signs that this trend is continuing into 2011 , allowing a growing number of professional landlords to get onto the market – or broaden their portfolios – and take advantage of near record rental income and strong tenant demand.’

According to Mr Brown, international investors will also be playing their part while yields look attractive and properties are affordable.

Meanwhile, tenant arrears fell back slightly in January, but remained high with 11 per cent of all UK rent in arrears.

21

NEWS

Reconstructing our regionsThe clear economic benefits of meeting housing needs

The Home Builders Federation’s (HBF)

report, ‘Reconstructing Our Regions’, for the

first time unveils the clear economic benefits

of meeting housing need and tackling the

housing crisis.

The report analyses the potential

impact of the government’s New Homes

Bonus incentive to local communities

and the upturn in employment in housing

construction that would be seen if local

areas build the homes needed to meet the

government household projections over the

next two decades.

Last year saw the lowest number of homes

built since 1924 and almost five million

people on the social housing waiting lists. It

also saw a record low number of first-time

buyers, with more and more people in their

30s staying with their parents.

HBF Executive Chairman,

Stewart Baseley, said:

‘Building houses is a win-win for communities

across the country. Not only will families get

the homes they need but local employment

and increased investment will be boosted.

‘Economic growth is fundamental to a

successful recovery and housing has a huge

role to play – I urge Local Authorities to

reap the rewards of development and start

building the homes the country needs.’ n

Recently released research reveals that building the homes

required to meet government’s projections of need would

mean £1.2bn of investment annually across the country and the

creation of over 215,000 jobs.

22

UNDERPINNING THE UK PROPERTY MARKET

Strong demand for good-quality family houses

Strong demand for good-quality family

houses underpinned the UK property

market and helped support price growth

towards the end of last year, according to

estate agents Winkworth.

According to the group’s latest report, the

average asking prices of properties on

its books rose from £494,000 to £532,000

between August and November 2010.

Overall demand from buyers fell during the

three months, however, as confidence waned

and mortgage availability remained tight.

The number of properties for sale across the

UK remained stable and above levels seen

during the same period a year earlier. But

it was the growing demand for high-calibre

family homes that underpinned the market,

fuelling an upward trend in asking prices.

Dominic Agace, Chief Executive of Winkworth,

said: ‘It is the availability of finance which

remains a key determinant of the level of

activity in the housing market in 2011.

‘ U n t i l t h e b a n k s fe e l co m fo r t a b l e to

l e n d a g a i n , p a r t i c u l a r l y a t t h e b o t to m

e n d o f t h e m a r ke t , vo l u m e s a re l i ke l y

to re m a i n co n s t ra i n e d . ’

In the rental sector, demand continued

to outstrip supply between August and

November, with the number of properties to

let sliding to a level more than 45 per cent

lower than that of the same period in 2009.

Residential property buyers are taking

major financial risks by not having

surveys carried out on their future homes,

according to new research.

A study by chartered surveyors e.surv

showed that buyers gambled an

estimated £1.3bn last year by failing to

have a survey done before making a

house purchase.

Researchers found that eight out of ten home

movers choose not to have a survey, although

the average private survey – costing as little

as £200 – identifies works requiring around

£1,800 to put right, giving buyers room to

negotiate on the seller’s asking price.

According to HM Revenue & Customs

(HMRC) figures, there were approximately

880,000 residential property transactions

in 2010, meaning that more than 700,000

buyers can expect to fork out more than they

bargain for when purchasing a home they

have not had surveyed.

Richard Sexton, Sales Director for e.surv,

commented:

‘Interestingly, people buying more expensive

properties are more thorough when they

buy, despite the fact they are the ones who

can afford to fix dodgy roofs or unexpected

damp patches.

‘But they’re not just being risk averse – they

use surveys to barter down sellers very

effectively. It’s the people who can least

afford something to go wrong who are

missing out,’ he added. n

NEWS NEWS

Residential property buyers gamblingAre you taking a major financial risk by not having a survey?

MORTGAGE LENDINGHome loans on offer have more than doubled

The number of mortgages available from UK lenders has more than doubled in the last two years, but other factors continue to keep buyers out of the housing market.Research by Moneyfacts.co.uk shows choice falling to an all-time low two years ago, when only 1,097 residential mortgage products were available.

Since then, the number of home loans on offer has more than doubled, to 2,447, with borrowers holding a 20 per cent deposit seeing the number of deals available soar from 97 to 390.

Currently, the largest range of products is to be found in the 75 per cent loan-to-value (LTV) tier, where 851 mortgages are available, up from 422 two years ago.At the same time, the number of loans at 60 per cent LTV has fallen from 261 to 187, the financial website reports.

However, Moneyfacts claims that despite the overall rise in mortgage availability, access remains restricted for many.

Spokesperson, Michelle Slade, explains: ‘Borrower affordability remains the key factor in lending decisions and lenders remain strict over which borrowers they will accept.’

Ms Slade also warns that rising rates and the implementation of the Financial Services Authority’s Mortgage Market Review are likely to restrict affordability calculations further.

NEWS

The UK housing market remained sluggish at

the start of 2011, but an increasing number of

homeowners are rushing to remortgage their

property to ensure they are not caught out

by rising interest rates, research suggests.

According to the British Bankers’ Association

(BBA), the number of home loans approved

for house purchases stayed almost

completely flat in January, with only marginal

improvement from December’s two-year low.

At just over 28,900, the figure is

considerably lower than the 70,000 to

80,000 monthly approvals associated with a

stable housing market.

However, the number of homeowners

remortgaging increased by five per cent in

January – up 28 per cent on the same month a

year earlier – as families rushed to secure a fixed-

rate deal before interest rates rise as expected.

The number of UK remortgages exceeded

26,000 in January, just slightly less than

November’s 16-month high, fuelled by

speculation that the Bank of England

would boost the base rate to curb over-

target inflation.

David Dooks, Statistics Director at the BBA,

commented: ‘The high street banks have

seen more remortgaging activity of late as

people look to fix costs.’

Interestingly, the news follows Nationwide

research which indicated that 75 per cent

of homeowners have made no plans about

how they will cope if and when interest

rates rise.

Net mortgage lending was valued at £1.6bn

last month – approximately half the average

2009 amount. n

MARKET DATA

An increasing number of homeowners are rushing to remortgage

Pre-empting a future interest rate rise

23

24

DEVELOPER MAKES GOOD PROGRESS

10 ESSENTIAL MORTGAGE QUESTIONS

Even with economic uncertainties, tax rises and government cutbacks

What are the key questions you need to ask?

Redrow says it continued to make good

progress in the final six months of 2010, despite

the housing market being ‘overshadowed

by economic uncertainties, tax rises and

government cutbacks.’

The developer attributes much of its success

to its New Heritage Collection, which is

proving to be ‘aspirational’ for customers who

appreciate an emphasis on traditional values.

Furthermore, the group reported that

reservations were ‘comfortably ahead’ in the

first six weeks of 2011 compared with a year

earlier, although the figures may include an

element of ‘catch up’ from the December freeze.

Looking ahead, Redrow’s Chairman, Steve

Morgan, is more optimistic than some on

UK house prices, saying they have been

stable for some considerable time now ‘and

we do not share the pessimism of some

commentators that there will be a major fall

in house prices during the coming year.’

The group’s New Heritage Collection is currently

selling at an average £196,000, or 7 per cent

higher than equivalent homes in Redrow’s

previous Signature range.

Mortgages should be straightforward – you

borrow money to buy a property and pay

interest on the loan. But what are the key

questions you need to ask?

n How much can I afford to borrow?

n How can I tell which mortgage rate

is best?

n What is the best type of mortgage for me?

n How should I repay it?

n Can I make lump sum payments?

n Are there any redemption penalties?

n Does this mortgage come with insurance?

n What other charges will I have to pay?

n What happens if I can’t pay?

n What about the small print?

Rent climbed steadily last year and it seems

likely that the trend is set to continue in 2011,

as landlords look to increase prices.

Research from buy-to-let specialist Paragon

Group has revealed that 41 per cent of the

landlords it polled are planning to increase

rents during the next 12 months.

A further 55 per cent plan to keep rents at

2010 levels and just 4 per cent are looking to

reduce the amount of rent they are charging.

Of those looking to increase rental prices,

one in ten landlords are aiming to increase

the rent they charge tenants by 4 per cent

to 8 per cent. Nearly a third plan to increase

rents by up to 4 per cent of the current value.

Landlords are also in a buoyant mood

when it comes to demand, with 45 per cent

predicting growing levels of people looking

to rent and a further 44 per cent forecasting

already high demand to remain steady.

They have reason to be confident. Rents

in the private rented sector grew steadily

throughout 2010, according to the Royal

Institution of Chartered Surveyors (RICS).

More surveyors recorded rent increases

than falls in each of the first three quarters

of the year.

Nigel Terrington, Chief Executive of Paragon,

which polled 182 landlords, said: ‘Landlords

are in a strong position. Tenant demand has

risen faster than supply during 2010 and that

is expected to continue well into 2011.

‘This is reflected in landlords’ expectations

of future levels of tenant demand and also

the rent they are planning to charge for

their properties.

‘There continues to be a lack of finance

available in the UK mortgage market,

meaning that many potential buyers are

opting to rent instead.’ n

NEWS NEWS

Landlords look to increase pricesThe lack of finance means more potential buyers are opting to rent instead

25

Planning your remortgage.Isn’t it time you talked to us about saving money?We’re passionate about making sure you’ll obtain the best mortgage deal available.

Contact us to discuss your current situation, and we’ll help you find the best deal that's right for you.

GLOSSARY

Understanding

the jargon The A to Z of property and mortgage terms

APRStands for Annual Percentage Rate, which

helps you compare the cost of different

mortgage deals. It takes into account the

amount of interest you will pay, the length

of the term of the mortgage and other

charges, such as any arrangement fee.

ARRANGEMENT FEELenders sometimes charge a fee to cover

the work involved in setting up your

mortgage or for certain mortgage rates.

BANK OF ENGLAND BASE RATEThis is also known as the Bank of

England’s repo rate. This rate can go

up or down from time to time and is

announced by the Bank of England’s

Monetary Policy Committee.

BUILDING INSURANCEInsurance against the cost of rebuilding a

property from scratch following structural

damage, for example by flood, fire or storm.

BUILDING SURVEYThis is a technical report following an

inspection of the property. It will give you

a comprehensive account of the condition

of the property, describing any structural

or other defects.

CAPPED RATEYour interest rate won’t go above a

certain level – the ‘cap’ – during the

capped rate period. This means that you

can enjoy any rate reductions, yet have

the comfort of knowing that your rate

won’t go above the cap.

COMPLETIONThe day on which a property becomes

legally yours.

CONCLUSION OF MISSIVESThe Scottish equivalent of exchanging

contracts.

CONTENTS INSURANCEA policy insuring household contents

against theft and damage.

CONVEYANCERA legal expert handling all documentation

for the sale and or purchase of a property.

This will be a solicitor or licensed

conveyancer.

CONVEYANCINGThe legal process involved in buying and

selling a property.

CREDIT SCORINGA technique used by the lender to assist

in the assessment of your application.

DAILY INTERESTWith this method of calculating

mortgage interest, it is charged on the

amount of mortgage outstanding daily.

This means lenders take into account

any changes in the amount you owe on

a day-to-day basis.

DEPOSITThe money you pay on exchange

of contracts as part of your initial

contribution to the purchase of

your home.

DISBURSEMENTSAll the various costs itemised on your

conveyancer’s invoice for carrying out

your home buying legal work.

DISCHARGE FEEYou have to pay this to some lenders for

releasing their hold over a property once

you have paid off your loan.

EARLY REPAYMENT CHARGEWith some mortgages you have to pay an

early repayment charge if certain things

happen. For example, if you pay off some

or your entire mortgage or you transfer to

a different mortgage rate before the end

of the special rate period.

EQUITYThe difference between the amount you

owe on your mortgage and the current

value of your property.

EXCHANGE OF CONTRACTSThe swapping of contracts between

a buyer’s conveyancer and a seller’s

conveyancer. Once you have exchanged

contracts, you are both legally bound to

the transaction.

FEUDALA form of legal title applicable only in

Scotland.

FINANCIAL SERVICES AUTHORITY (FSA)An independent body that regulates the

financial services industry in the UK. Its

aim is to help consumers become better

26

informed about financial matters and to

help protect consumers.

FIXED RATEA rate of interest guaranteed not to change

over a fixed period of time.

FREEHOLDA form of legal title to land which means

you are the absolute owner of the property

and the land it’s on.

GUARANTORSomeone who guarantees to repay the

mortgage if the borrower can’t or won’t

for any reason. Guarantees are usually

entered into where the borrower’s

circumstances would not allow them to

borrow enough to buy the home they

want. For example, parents may act as

guarantors for their children when they

buy their first home.

HIGHER LENDING CHARGEFee or premium sometimes charged by

lenders if your mortgage represents a high

percentage of the property value.

HOUSEHOLD INSURANCEA way of referring to both buildings and

contents insurance.

INITIAL DISCLOSURE DOCUMENTInitial disclosure is the information you

will receive from an advisor when you

first contact them regarding a mortgage

or related product. It informs you about

the service you will receive, details

whether you will receive advice and

GLOSSARY

27

GLOSSARY

28

explains what fees may be charged. It

may help you to decide whether or not

to use that advisor.

INTEREST-ONLY MORTGAGEYou pay only interest to your lender

throughout the mortgage term and

your mortgage balance doesn’t reduce.

INVESTMENT MORTGAGEAs with an interest-only mortgage,

you pay only interest to your lender

throughout the mortgage term and

your mortgage balance doesn’t reduce.

At the same time, you put money into

a separate investment, which should

grow and pay off the mortgage as

scheduled. You must make sure you

keep premiums up to date on any

mortgage investment products.

KEY FACTS ILLUSTRATIONA Key Facts Illustration (KFI) sets out

details of the mortgage product that a

customer is interested in. All lenders are

required to set out the details in a Key

Facts Illustration in the same format,

so it’s easier for you when you want to

compare products. You must receive a KFI

before making an application.

LAND REGISTRY FEEYour conveyancer pays this on your

behalf to register your details in the

Land Registry records once you’ve

bought a property or changed your

mortgage lender.

LEASEHOLDThis means you own a property for a set

number of years. When the lease expires,

the property returns to the freeholder.

Flats are commonly sold as leasehold.

LIFE ASSURANCEA form of insurance by which someone’s

life is insured. Life assurance policies can

run parallel with a repayment mortgage,

so the mortgage should be repaid if you

die before the end of the term.

LOCAL AUTHORITY SEARCHPart of the conveyancing process when

you buy a property, carried out by your

conveyancer. It gives details of any matters

which, from the local council’s point of

view, affect the property. It reveals any

proposed changes to the local area, such

as road improvements, and details any

planning permission given for the property.

LTVThis means ‘Loan to Value’ and is the

proportion of the value or price of the

property (whichever is the lower), that

you borrow on a mortgage. For example,

a £63,000 mortgage on a house valued at

£70,000 would mean a LTV of 90 per cent.

MORTGAGE DEEDA legal document establishing a

mortgage on a property. This is called a

‘standard security’ in Scotland.

MORTGAGE TERMThe length of time over which you agree

to pay back your mortgage, up to a

maximum of 40 years.

NEGATIVE EQUITYThis is when the amount you owe on your

mortgage is greater than the value of

your property. It particularly becomes a

problem if you want to move house.

PREMIUMAn amount you pay on a regular basis. This

could be for an insurance policy, depending

on the mortgage product you choose.

REMORTGAGINGWhen you arrange a new mortgage on

your home, with a different lender, and

use the new mortgage to pay off the old

one. This could be to withdraw equity to

spend on home improvements.

REPAYMENT MORTGAGEYour monthly payments will gradually pay

off your mortgage as well as the interest if

your payments are strictly in accordance

with the terms and conditions of the

original loan.

REPO RATEThis is also known as Bank of England

base rate.

RETENTIONHolding back part of a mortgage loan by

the lender until repairs to the property are

satisfactorily completed.

STAMP DUTYGovernment tax you have to pay based

on the purchase price of a property worth

£125,000 or more. First-time buyers are

exempt from stamp duty on properties

worth between £125,000 and £250,000

until 25 March 2012.

STRUCTURAL ENGINEER’S REPORTA specialist report from a structural

engineer on the condition of a property.

SURVEY AND VALUATIONA property survey that can include a

valuation and should reveal any major

faults in the property. It must be noted

that valuations do not strictly involve

surveys. It is recommended that a buyer

should have a survey taken out.

TRACKER RATETracker rates vary in line with changes to

the Bank of England base rate. During the

tracker rate period, any changes to the

Bank of England base rate are passed on

to you in full.

VALUATIONArranged by your lender to find out if

the property is suitable to lend a

mortgage on.

GLOSSARY

29

Published by Goldmine Media Limited, Prudence Place, Luton, Bedfordshire, LU2 9PE Articles are copyright protected by Goldmine Media Limited 2011. Unauthorised duplication or distribution is strictly forbidden.

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